Pitchfest People's Choice: Urban Machine, Pitch by Eric Law

This series highlights our Pitchfest finalists. At the 2023 Housing Innovation Summit, we introduced a new program, coined: Pitchfest in order to bring new ideas to light, offer feedback that startups can use to advance their solutions, and introduce these innovators to potential advisors, partners, investors, and clients. A dozen companies made it to the final round, and four came out on top.

In this episode, you'll hear Eric Law from Urban Machine give his pitch.

The presentation starts rockin' out with a short 20 second video at min 2.50. Watch the video here.

Visit the Summit website.

Transcript

Haley Baumeister (00:00):

Hello and welcome to the Housing Innovation Alliance podcast. This series highlights our pitchfest finalists at the 2023 Housing Innovation Summit. We introduced a new program coined Pitchfest in order to bring new ideas to light, offer feedback that startups can use to enhance their solutions and introduce these innovators to potential advisors, partners, investors, and clients. A dozen companies made it to the final round and four came out on top. In this episode, you'll hear Eric Law from Urban Machine give their pitch. They were the winners of the People's Choice category to get in touch with them, visit their website and find ways to connect in the description.

Eric Law (00:38):

Hey, good afternoon everyone. My name's Eric Law. I'm the co-founder and CEO of Urban Machine. We are on a mission to convert the 37 million tons of wood waste every year into premium lumber products. So every year here in the United States, the construction demolition industry throws away 37 million tons of dimensional lumber. So that's two by fours, two by six. To put that in perspective, that's about half of what we logged from our soft wood forest. That is a massive amount of material that we throw away here to make the problem even worse. In the next 60 years, our landfills will be full. Here in the United States, if you thought permitting a new development took long, imagine permitting a landfill. Those are 30 to 40 year projects and who wants to fill up a canyon with our garbage? So we have to find a new avenue for this.

Eric Law (01:18):

The other thing why this is important is wood is the predominant building material for our housing stock, whether it's single family, multi-family. As we saw during Covid, when lumber prices spiked up to 1400, $1,600 a board foot, it had a dramatic impact on housing. It sent the price of housing up quite substantially with lumber packages add in the fact that we have to build a lot more housing, we don't have more forests despite the lumber industry's predictions that we have these infinite forests. We do not. It is 100% bs. We have to reuse our current materials that we've harvested. So the way I came across this problem was I was studying sustainability as part of the innovation program at a large contractor. And that's why I learned that wood is the only structural building material that we do not recycle. Both structural steel and concrete both have recycled passed.

Eric Law (01:58):

Unfortunately, wood does not. So what we're doing is we wanna make it circular. Wood has a tremendous amount of green benefits with storing carbon to begin with. It's a natural product, it's a very strong product, but unfortunately at the end of its life it goes to landfills and a low bit to incineration. And so the goal of what we're doing at Urban Machine is to close that loop. We wanna take that wood from construction and demolition and we want to turn it back into a product that can be used. The other great thing about wood is it's a beautiful product and it has a story to go with it. The cool thing that we can do with wood that you can't do with steel and concrete is we can actually track that story and embed that on the wood with a QR code. So imagine walking into a building like this and you see our QR code on one of these wood panels.

Eric Law (02:34):

You hit it and it says this wood came from an old building that was built in the early 19 hundreds down the street here in Denver, Colorado. So there's a lot of value to it beyond its structural strength. It's a beautiful warm material that everyone loves and we can share that story with the world. And so how are we doing this? So at Urban Machine, we're building robotics to reclaim that lumber. There we go. And so what we've done is using computer vision and defectors gantry, we've built our own technology in Oakland to automate the process of pulling nails, staples and screws. And so with our system, we have multiple workflows. The one thing that's holding it lumber back from the use is these passengers that hold our buildings together are incredibly hard doing move. And so we're using the latest in computer vision, AI and robotics to automate that process.

Eric Law (03:19):

And so the great thing about the material that we're saving is it's higher quality than what you get out of the forest today. A lot of the material that's coming out of our buildings is the youngest is early eighties, going all the way back to the early 19 hundreds. And in the early 19 hundreds the two by four used to be a two by four and it's really tight grain with very few knots. So the architects love that stuff. And then the other products we're turning into engineered products that you can use again in your buildings. The other thing we're doing too is we're making our solution mobile. One of the things we learned early on, as we are receiving loads of dump truck lumber with dump trucks emptying our warehouse is moving lumber that's full of nail screws and staples is expensive cuz dump trucks typically are moving about 50% air and a lot of the material is getting damaged in transit.

Eric Law (03:56):

And so what we're doing is we're putting our robotics onto trailers and these trailers will be coming out of our shop here at the end of May for field trials. And so it'll allow us to clean the material at the job site. So imagine taking a large commercial building that a contractor's taking down and you feed that wood directly into our machines and out the other end comes lumber, no metal in it. And then we ship that on flatbeds off to our customers. Our goal is to keep the material within a hundred mile radius of the job site. It's so full loop to give you an idea, a traditional lumber process, you're looking at more like 2000 miles for their supply chain from forest through the mills into your customer depending on where you are. So it reduces our costs. It also improves the carbon benefit of our products.

Eric Law (04:31):

We source our material from demolition contractors c and D facilities. We evangelize with architects and designers just like traditional construction products to specialized reclaim materials and also specialize uh, recycling materials from demolition projects. We're working with developers, large owner operators to reuse the material and wood manufacturers to specify and use that material back in. To give you an idea of the market size, we believe we can recover about 50% of the dimensional lumber here in the United States and generate an 18 billion a year market selling that lumber back into the wood industry. California alone, we can recover almost a billion board feet in that market on an annual basis. It's locally sourced this way. It's a huge improvement on the environment and what it does is it allows an ecosystem to thrive around it as well. So now you can manufacture lumber based products within a local industry.

Eric Law (05:15):

So take for example, the southwest LA to Texas has very low wood manufacturing today because they're far from the trees. With our process, we can recover the material from those environments, essentially harvest the local built environment and then you can build local ecosystems and you can spur economic growth around that. So you're no longer trucking materials across the country or across the globe. You can do a lot more small micro manufacturing and locally sourced. And the materials are everything from solid lumber. In this example we're processing glue lamb and so we have a designer that turned it into tables that took uh, historic glue lamb from a building and turned it into tables. So you can also do furniture. So as I mentioned today, we are getting ready to release our first set of trailers out of our shop here at the end of May.

Eric Law (05:52):

We're based in Oakland, California. We just closed our seed round last October. Our first trailers, it's two trailers, two 40 foot flat deck. So it's an 80 foot long process line. It's got about a dozen different systems on that process line. And then our goal is to continue to prove out the technology this year and the integration to get to our unit economics. Next year we'll do a small production run of about a dozen systems. Those will deploy to six different markets to validate that we can do this in the Pacific Northwest all the way down to Dallas, Texas.

Speaker 3 (06:22):

Great. Um, yeah, great job. Uh, got a couple questions. Yeah. One is, how many times can a board be recycled in through year process?

Eric Law (06:29):

Yeah, so most of the lumber spends about 40 to 50 years in a building on average. So you can recycle it probably three to four times each time you do lose. We find we're losing about three to 5% of the board. Typically the ends of it is where the nailing and the splits occur. So you do have a little bit of loss on each recycle activity.

Speaker 3 (06:44):

Okay. Yeah, that's, that's what what I figured as far as what's your plan to scale, cuz obviously it's as you go to new markets and acquire new machines. So along with that, what's your cost per unit as far as uh, developing

Eric Law (06:54):

The machines? On our roadmap, we'll be operating the machines. So we'll be doing as a service to bring this into the market, get people comfortable with it, finish iterating on the tech. So we'll be in the wood business for about three to five years. And then our goal is once everybody's comfortable with it, we've proven the economics then to start sell, lease the machines. So think United Rentals, uh, would do the maintenance and operation on these things. So this way demo contractors, much like they're chippers, since they have a chipper, they would have a cleaning machine on the job site and then we'd have a marketplace for them to sell the wood back into the ecosystem. Today the demo industry and the waste industry has no idea about the lumber industry. They don't work together. So we're gonna create that link in the economy. The cost per system is between a million and a million and half dollars, which is very similar to the chippers that we're competing with. And our goal is to get it to compete with the virgin lumber price of 35 cents a board foot.

Speaker 4 (07:36):

So assuming that the demolition process will become more expensive and may, maybe that's not a safe assumption. Maybe that's the question of, you know, what's that look like today versus what it needs to be to actually create raw material for you to be able to make lumber out of. Who pays for that?

Eric Law (07:50):

There's typically two types of costs on demolition. If it's, say it's a open joist warehouse from the 1960s, the costs to deconstruction demolish are the same. It doesn't cost a demo contractor anymore. They have to go a little slower on the project. They can't just smash it as quick as they would. But the cost savings from the waste stream, they typically pay a hundred to $150 a ton to dispose of that material. So when you get rid of that cost on lumber and you put that into the demolition side, now if you take a building like this that has drywall on both sides of the studs lot, two by four, two by six, it costs more money to deconstruct. And so what we're seeing is we're seeing a lot of jurisdictions, instead of building new landfills, they're requiring deconstruction. And that's gonna gain a lot more momentum here in the next five to 10 years because the cost for the landfill is way higher than requiring people to deconstruct.

Eric Law (08:30):

Also, we're seeing a lot of jurisdictions set up salvage operations for collecting materials, not just wood, but think of windows, doors, steel, and start to warehouse and store that material because it does require it. So San Francisco, Seattle, San Antonio, Texas, these are all ones that are currently on paths to do that. Either they have pilot projects in place or they're doing it insulation. You got it. And you're gonna see a lot more products coming out of reclaimed materials because today once you grind up wood, you have completely destroyed the value prop. Wood strength is in its fiber,

Speaker 5 (08:58):

Understanding the demolition contractor side in the new construction world, which is probably the biggest offender of waste. Talk a little bit more about how either the mobile site would get there. What's the revenue exchange that you're then giving to that developer for absorbing the risk of having your mobile site there? Or in the case of the landfill, how's the revenue exchange work with the landfill to be able to say, let me come on site and and pick or exchange through your

Eric Law (09:21):

Lumber? Yeah, so ironically the new builders are only 10% of the waste stream. 90% comes from demolition. So you're actually a lot smaller portion. And as more job sites go to prefab, that's gonna get even smaller. The other challenge you have with a new build is short blocks, right? You guys aren't throwing away eight foot 20 foot pieces. You guys are 12 inch pieces typically. So it's a very small waste stream and there's actually other companies going after those small blocks, which is pretty cool. As far as the CN D folks, again, the economic change is two things. One is their paying tipping fees. So if I'm a CN D processor, like Republic Services that's collecting all this material and handling it all, I still have to pay a tipping fee for the landfill disposal. I have to grind it up, I have to truck it off to that landfill.

Eric Law (09:58):

And so there's another, you know, a hundred bucks a ton right there. So they may be collecting one 50 from the contractor and then they're paying a hundred out the door. If I go to 'em and I say, Hey look, stop paying that a hundred dollars out the door and you keep collecting the one 50 from the contractor, you just tripled your margins, right? So it's quite improvement and you have a greener solution than saying, Hey, this material I'm burning or putting in the ground into a landfill. It's a much greener story for them as well, especially on the Carbon County.

Speaker 5 (10:22):

How about end users? I know you mentioned a little bit in there about engineered wood perhaps. Do you have just any target in mind of either who the end users could be or then specific SKUs or like species that you'd be looking to source?

Eric Law (10:35):

We're focused on all dimensional lumber across the country. So right now we're on the west, so the majority of our feedstock is Doug Fir, Doug fir. And the two by four is, it's Doug Fur and the Glu Lambs West coast is a lot, Doug Fir. As we head into Northeast, we're gonna hit everything. We're gonna hit hardwood softwoods, they've built buildings up there with Oak Poplar, you know, every tree species they can find. So what we try and do is take that local wood, and so as we're processing it, we're identifying the species, the quality of the material, we're g grading the material with our system as well, so then we can get it to the customer that can put it to the next best use. So for example, hardwoods would go to furniture, right? Typically they're not going back in the building industry. Your softwoods go back into building products. If it is old growth softwoods, the architectural folks, the furniture folks will use that. If it's your newer, say it's your waste wood coming off of your job site that's going into engineered products. Think mass timber for example. Is

Betsy Scott (11:21):

There anyone buying all this recondition wood at scale? And can you talk a little bit more about your revenue model?

Eric Law (11:27):

Yeah, so nobody's buying it at scale today, right? Everybody buys Virgin from the forest. US is about a hundred billion board feet a year in terms of consumption. We produce about two thirds of that. The other third comes from Canada. Most of your reclaimed lumber is about 1% of the waste stream today. And that's really your architectural, your barnwood kind of really unique ones where they're deconstructing buildings by hand. And that's usually 10 to $40 a board foot. So incredibly expensive for your reclaim. Our goal is to bring it down so we can do it at scale and scale to economics to compete with Virgin Wood. And that's really why it hasn't been adopted on broad scale today. A lot of manufacturers that we've spoken with are like, we can process reclaimed as long as the price comes down to compete with the virgin. And when you have a 10 x delta today between Virgin and reclaimed manufacturers can't cover that. And that's where we come into play. So our model is to sell wood for the next three to five years, then we'll lease the machines, sell the machines just like a traditional construction hardware manufacturer. So just like your John Deeres and folks out there on the market. So

Betsy Scott (12:18):

If the ventral goal after three to five years is to lease the machines, are you also creating a marketplace for the people who are renting the machines to be selling that wood? Because I assume right now if they're just sending it to landfills, they have one customer or they have one end user, what you're describing is we're helping you to recycle all of these different kinds of boards and you might be sending 'em to furniture manufacturers or Nutra or whatever it might be. How are you gonna help them make that transition?

Eric Law (12:39):

Yes, we're building a software marketplace. So one of the things we're doing is because we scan all the materials that runs through our machine, we can quantify and qualify it. And so what we're doing is we actually wanna get to a point where we can predict the material that's coming out of a building. So we're gonna build that data set with our capture technology and then that'll feed into the platform. So if you're a demo contractor, you go plug in an address that says, Hey look, next month I'm gonna take down building XYZ on this street. We look at the age of the building, the location of the building, and then we can develop their inventory form 'em before they even take it down. Thank

Betsy Scott (13:07):

You. That was awesome.

Eric Law (13:08):

Thank you guys very much.

Haley Baumeister (13:12):

Thank you for listening to the Housing Innovation Alliance podcast. We invite you to learn more about pitchfest and let us know if you are interested in participating in the next cohort@housinginnovationsummit.com.